The long-term rating was chopped to BBB from A and left with a negative outlook, said Fitch, swooping as expectations mounted that the Europe Union would have to throw a lifeline to Spanish banks.

That was more than double its previous estimate that the banking sector, stricken by its vast exposure to the collapsed property market, would need 30 billion euros.

A bank rescue would also push up the state’s total accumulated debt at a rapid pace, Fitch said, warning that gross general public debt would likely peak at 95 percent of total economic output in 2015.

The country’s level of foreign debt also made it “especially vulnerable” to contagion from the crisis in Greece, where a general election on June 17 could see the country forced out of the eurozone if a new government refuses to abide by austerity provisions agreed in return for a bailout.

At the same time, Spain faces rising costs to raise money on the markets, making international bailout for the financial sector more likely, it said.

Spain raised 2.07 billion euros in a bond auction earlier in the day but had to pay a high price, with the 10-year bonds fetching more than 6.0 percent — a rate widely regarded as unsustainable over the longer term.

European blunders carried much of the blame for Spain’s woes, it said.

In particular, it complained of the absence of a “credible” European financial firewall that left Spain and other vulnerable eurozone nations vulnerable to capital flight and made it harder for them to borrow on the markets.

Latest Bank of Spain figures showed a net 97 billion euros of investors’ money fled Spain in the first quarter of this year, a record.

Investors fret over the cost of saving Spain’s banking sector and they are sceptical about its attempts to rein in deficits at a time of recession and 24.4-percent unemployment.

An IMF report on Spanish banks to be released on Monday will price their capital needs at 40-80 billion euros, Spanish newspaper ABC said Thursday, citing a draft of the document.

But New York-based Standard & Poor’s rating agency estimated the banks would likely book loan losses in 2012 and 2013 of 80-112 billion euros.

If such losses are taken this year, “we think Spain’s banks would require substantial capital to continue complying with current minimum regulatory capital ratios,” S&P said in a statement.

The Spanish authorities have given themselves two weeks to take a decision on how to recapitalise weakened banks.

In Brussels, the head of eurozone finance ministers Jean-Claude Juncker, said the bloc would recapitalise Spain’s banks if asked.